Tien Tzuo, the CEO of Zuora, has written a powerful book that is wholeheartedly and unabashedly about subscription monetization. Brilliantly structured and extremely well researched and written, it makes for a compelling read. Of course, the author was at Salesforce.com before he founded the company, Zuora which specializes in the subscription economy.
It is hard to argue with the points made by the author and the book is undoubtedly thought-provoking. As he asks repeatedly in the book, “what product or service do you have, that cannot be moved to a subscription model?” It is difficult to find an answer to that question. A few did come to my mind – something like a TV or a Washing Machine – surely, these cannot be on a subscription model. But, I am wrong, of course. There are any number of online sites that nowadays rent TVs. A simple Google search for “TV on rent” threw up 4 advertised results, followed by numerous hits. I even know that I can rent a 40 inch TV at Rs. 1400/ month. Tien makes a compelling case for moving from an ownership model to a subscription model, no matter what you are selling. Nowadays, there are cars on lease that can be returned to the dealer after 3 years for an upgrade at the same monthly rate. As he points out, there are already so many subscriptions that we are a part of, that we do not even know when the monthly amount is deducted. For example, I have an Amazon prime subscription that I renew every year. I also have a iTunes Music subscription that is renewed every month. Again, the question is – what product do you have that cannot be based on a subscription model.
Returning to the example of the TV on rent – at the rate of 1400/- per month for a 40 inch TV, I am free to change the TV after 2-3 years, which would be approximately the price that I would pay for a brand new 40′ TV (say Rs. 28,000/- in a super deal). It is likely that in two years, I would want to move to a bigger screen or a 4K TV set, which would cost me much more. A rental TV works out very well even in this scenario. Consider the case of a temporary accommodation for a worker who moves to a new city – would he spend a lumpsum on a TV or chose to rent it on demand? It is a no-brainer, isn’t it?
There are excellent arguments and examples for every traditional business model that exists today. As the author puts it, companies that work like Hollywood movies (or Bollywood, for that matter), are priming themselves up for failure. It is no wonder that the popular shows run on platforms such as Amazon, Netflix or Balaji ALT films nowadays. How much more time before we see the death of the movie industry as we know it today? The days of betting all the money on a big budget movie that everyone in the production house prays for a success are short-lived. Even Hollywood production houses will be moving to a model where they listen to the customer first. Singers are releasing singles nowadays in a breakaway from the past of releasing only albums in CDs. Why do I have to buy the entire album when I want to listen to only one song? is a question that was answered by Apple Music first and now, by the entire music industry. How much time do you think will the movies survive in the model of big budget, big star movies? Is it a surprise that all the stars are now moving towards TV shows. Even Julia Roberts had her first TV show premiering recently.
The book is a must-read for all CEOs and entrepreneurs. If you are not thinking of how you can gather data about your customers and how you can turn your product into a subscription based model (anything As A Service or AAAS as I call it) , you better start doing it now.